Sprouts Farmers Market 2013 Annual Report Download - page 106

Table of Contents
Comprehensive Income (Loss)
Comprehensive income (loss) equals net income (loss) for all periods presented.
Recently Issued Accounting Pronouncements
In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” which amends ASC 740, “Income Taxes.” ASU No. 2013-
11
requires that unrecognized tax benefits be classified as an offset to deferred tax assets to the extent of any net operating loss
carryforwards, similar tax loss carryforwards, or tax credit carryforwards available at the reporting date in the applicable tax
jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply
if the tax law of the tax jurisdiction does not require the Company to use, and it does not intend to use, the deferred tax asset for
such purpose. This guidance is effective for reporting periods beginning after December 15, 2013. The Company does not expect
the adoption of this guidance to have a material effect on the consolidated financial statements.
4. Business Combinations
As discussed in Note 1, “Organization and Description of Business” the Company completed the Henry’s and Sunflower
Transactions in April 2011 and May 2012, respectively. Each of these transactions were accounted for as a business combination.
The primary reasons for these transactions were to build a larger portfolio of stores under the Sprouts Farmers Market banner and
to derive synergies from the combined operations of the companies.
In a business combination, the purchase price is allocated to assets acquired and liabilities assumed based on their fair
values, with any excess of purchase price over fair value recognized as goodwill. In addition to reviews of acquired company
balance sheets, the Company reviews supply contracts, leases, financial instruments, employment agreements and other
significant agreements to identify potential assets or liabilities that require recognition in connection with the application of
acquisition accounting under ASC 805. Intangible assets are recognized apart from goodwill when the asset arises from contractual
or other legal rights, or is separable from the acquired entity such that it may be sold, transferred, licensed, rented or exchanged
either on a standalone basis or in combination with a related contract, asset or liability.
Henry’s Transaction
Pursuant to the terms of the agreements governing the Henry’s Transaction, on April 18, 2011:
The $274.6 million payment was accounted for as a distribution to S&F in the Company’s consolidated statements of
stockholders’ equity.
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• The Company (through its wholly-
owned subsidiary, Intermediate Holdings) purchased all of the outstanding membership
interests of Henry
’
s for a cash payment of $274.6 million;
• Sprouts Arizona contributed substantially all of its assets and liabilities to SFM, LLC and the former owners of Sprouts Arizona received 45,650,000 shares (representing a 41.5% ownership interest in the Company), which were
subsequently transferred to the Liquidating Trust;
•
Cash distribution of $199.1 million was paid to the Liquidating Trust; and
• Sprouts Arizona pre-combination debt was extinguished and preferred equity was redeemed.